Many couples plan to move house or extend their home once the baby has arrived and yet they fail to consider the impact Statutory Maternity Pay (SMP) has on proof of income. Mortgage providers certainly air on the side of caution when it comes to lending to new parents – so what will be needed to prove your income to a lender?
Proof of income
Your prospective lender should be able to tell you precisely what is required in terms of proof of income. However, in the case of employees who have just started their maternity leave three months previous payslips should do the trick.
For those who have already started along the route of reduced maternity pay or no pay at all, then it may be an option to use your P60 which will indicate your previous year’s income, including bonuses etc.
Unfortunately, if the tax year is ticking away, you may be required to submit a letter from your employer detailing your return to work date and expected returning salary.
Providing you can supply both your P60 and a letter from your employer, your lender should base their assessment of your mortgage application on your salary that you will have on returning to work (rather than your annual income while you were on maternity leave).
Children cost more than you think!
However, childcare costs can remove a huge proportion of a person’s salary and can seriously affect your ability to pay a mortgage. So, when assessing your mortgage application, your lender will want to know how much you’ll be spending on childcare and if you are in receipt of childcare vouchers etc. Also don’t forget that private education fees are also taken into the consideration by lenders and all significantly dent your annual income.
So although it may be enticing to look back at what was and what you used to be able to afford – it may be best to plan forward and your employer’s payroll department will be able to provide you with the exact numbers to work with.
Do you think UK statutory maternity pay is penny pinching? Our blog Statutory Maternity Pay SMP Comparison Chart from other countries certainly puts you in the picture!